Summary of Statement No. 28

Accounting for Sales with Leasebacks—an amendment of FASB Statement No. 13 (Issued 5/79)


Paragraph 33 of FASB Statement No. 13, "Accounting for Leases," generally treats a sale-leaseback as a single financing transaction in which any profit or loss on the sale is deferred and amortized by the seller, who becomes the lessee. This Statement requires the seller to recognize some profit or loss in either of the following limited circumstances:

If the seller retains the use of only a minor part of the property or a minor part of its remaining useful life through the leaseback, the sale and the lease would be accounted for based on their separate terms. However, if the rentals called for by the lease are unreasonable in relation to current market conditions, an appropriate amount would be deferred or accrued by adjusting the profit or loss on the sale. The amount deferred or accrued would be amortized as an adjustment of those rentals.

If the seller retains more than a minor part but less than substantially all of the use of the property through the leaseback and the profit on the sale exceeds the present value of the minimum lease payments called for by the leaseback for an operating lease or the recorded amount of the leased asset for a capital lease, that excess would be recognized as profit at the date of the sale.